company updatethe pp will be 7.4%, but this should be offset by eps growth (full dilution) of around...
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Company Update 2 April 2015
1
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Gunkul Engineering PCL (GUNKUL)
New TP to reflect new project value
► New investments have become clearer.
► Revised earnings up from 2017 onward, while maintaining
the bright outlook for this year and 2016.
► Growth stock with a new target price of Bt40.70.
New investments become clearer, but needs a fresh cash call
We included further projections for GUNKUL’s new investments,
which have become clearer in how they will be funded and the project
details. The new investments are; 1) 32 MW solar farm in Japan, GK
Sendai, which would begin commercial operations in 2017, and 2) 50
MW wind farm in Korat, KWE, which is scheduled to begin operations
in 1Q17. With the overflow in power plant investments in the next 2-3
years, GUNKUL has called for additional fresh capital through private
placement (PP), which we believe must be completed this year.
However, the earnings increment from the usage of cash from PP
would compensate for the dilution effect.
Revised earnings up from 2017 onward, while maintaining bright
outlook for this year and 2016
With our new forecasts, our earnings projections for 2017 onward
have been revised up to stay above Bt2.0bn thanks to the new power
plant projects which would generate additional stable cash flow
income for GUNKUL. Meanwhile, we maintain our positive view on
the company’s 2015 and 2016 performance. Its 2015 net profits are
expected to come mainly from EPC operations for the construction of
solar power plants, thanks to the government’s policy to accelerate
solar power generation in the country, particularly this year. We
project a 2015 net profit of Bt815mn, increasing 49% YoY. In 2016,
we expect net profit to increase 16% to Bt947mn, driven by the
commercial start-ups of the 60MW wind farm for the WED project,
which can partially offset the YoY drop in EPC revenue.
Growth stock with new target price of Bt40.70
We changed our valuation method for GUNKUL from SOTP to DCF,
in order to reflect the usage of cash on hand after issuing PP. We
revised our 2015F target price to Bt40.70 (full dilution), from Bt28.00,
(Bt33.15 after XD). Please see detailed information of the valuation in
Table 5. Current share price is equivalent to 0.94 PEG and represents
a 13.8% upside. We recommend BUY.
BUY
TP before XD: Bt40.70
TP after XD: Bt33.15
Closing Price: Bt35.75 Upside/downside +13.8%
Sector Energy
Paid-up shares (shares mn) 880
Market capitalization (Bt mn) 31,460
Free float (%) 35.28
12-mth daily avg. turnover (Bt mn) 147.64
12-mth trading range (Bt) 39.50/
11.80
Major shareholders (%)
GUNKUL Group
UOB KAY HIAN (HONG KONG)
59.97
4.55
Financial highlights
Source: Financial statement, AWS
Thailand Research Department
Mr. Napat Siworapongpun
License, No. 49234
Tel: 02 680 5094
Unit: Btmn 2014 2015E 2016E 2017E
Net Profit 545 815 947 2,167
Net Profit Growth -38% 49% 16% 129%
EPS adjusted* 0.50 0.69 0.80 1.82
EPS Growth -38% 38% 16% 129%
P/E (x) 57.7 38.6 33.2 14.5
P/BV (x) 9.4 4.6 4.1 2.8
ROE (%) 17.6 16.1 13.0 23.0
* Adjust for dividend stock, full dilution
Company Update 2 April 2015
2
Please see disclaimer on last page
New investments have become clearer
Apart from GUNKUL’s materialized investments in our prior forecast, we have included
new investments which have become clearer and more substantive how they will be
funded and the project details. The new investments are; 1) solar power plant in Miyaki,
Japan, GK Sendai, with a contract capacity with the provincial authority of 32 MW, and 2)
wind power plant in Korat, KWE, with a contract capacity with EGAT of 50 MW. (Table 1)
Table 1: New investments in power plants
Source: Company data
Table 2: GUNKUL’s power plant projects
Source: Company data
In total, GUNKUL has four core renewable power plants (WED, GNP, KWE, and GK
Sendai) to invest in during 2015-2017, which will be major earnings growth drivers until
2018. However, given the overflow in project investments, we believe the company
needs a call for additional fresh capital, which we estimate to be at least Bt3.0bn.
PPA with EGAT
PPA/ Loan agreement
with local bank
Base tariff +
Adder
FiT
4,249
3,750
1Q17
2017
Miyaki,
Japan
Nakorn
Ratchsima
50
31.75
2. KWE
1. GK Sendai
StatusElectricity
price term
Project cost
(Btmn)
Capacity
(MW)Projects SCODLocation
Energy/
Capacity 2013 2014 2015 2016 2017
GCPG Project 1 Chondan 51% 2011 7.5
GPS Project 1-3 Tasang, Taked, Dong-Khon40% 2012 19.5
GPS Project 4 Bung Samphan 40% 2013 6.5
GCPG Project 2 Petchaboon 51% 2013 8.0
GCPG Project 4 Nakorn Nayok 51% 2013 8.0
GCPG Project 3 Pichit 51% 2013 4.5
GCPG Project 5 Bung Samphan 51% 2013 3.0
NK Kanchanaburi 100% 2013 1.0
Solar Roof/1.1 MW WHA GUNKUL Thailand 25% 2014 4.3
Solar Roof/3.4 MW GUNKUL Thailand 100% 3.4
GKMCP Phase # 1 Yangon, Myanmar 51% 2013 25.0
GKMCP Phase # 2 Yangon, Myanmar 60% 2H15 25.0
Wind # 1/60 MW WED Nakorn Ratchsima 100% 2Q16 60.0
Wind # 2/60 MW GNP Salarnlom 100% 4Q16 60.0
Wind # 3/50 MW KWE Nakorn Ratchsima 100% 1Q17 50.0
Solar Farm/32 MW GK Sendai Miyaki, Japan 100% 2017 31.8
CODLocation
Contract
MWCompany/Project
GUNKUL
stake
Solar Farm/58 MW
Gas Engine/50 MW
Company Update 2 April 2015
3
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Table 3: GUNKUL’s equity cash flow needs
Unit Btmn 2015F 2016F
1. Project cost 5,250 9,319
-WED 5,250
-GNP 5,070
-KWE 4,249
-GK Sendai*
2. Acquisition cost** 1,145
3. Running up debt on projects 3,725 6,523
-WED 3,725
-GNP 3,549
-KWE 2,974
-GK Sendai*
Equity injection needs 2,670 2,796
CFO generated 856 1,107
Net cash at the end of prior year Net debt Net debt
Equity needs remaining 1,814 1,689
* Assume develop in 2017 ** Acquisition payment could be delayed
Source: AWS estimate
However, dilution from PP should be offset by earnings increment
GUNKUL’s board of directors has resolved to set a capital increase program through
PP issuance of 8% of paid-up capital, which must not be less than the market price. We
believe this will be approved at the company’s AGM on 10 Apr. The dilution effect from
the PP will be 7.4%, but this should be offset by EPS growth (full dilution) of around
41.2% CAGR until 2018, compared with 14.6% growth of EPS if there is no capital
increase.
Table 4: Scenario analysis of EPS CAGR (2015-18)
Full dilution 2014 2015F 2016F 2017F 2018F CAGR
EPS 0.50 0.74 0.67 0.76 0.86 14.6%
EPS with capital increase 0.50 0.69 0.80 1.82 1.97 41.2%
Source: AWS estimate, adjusting for dividend stock.
Table 5: DCF valuation
Cost of firm assumption DCF valuation
Beta 1.2 Enterprise value 43,170
risk free rate 4% Net debt 3,787
market risk rate 12% minority interest -1
cost of equity 13% Equity market value 39,384
cost of debt 4% no. of share before XD 968
effective tax rate 10% no. of share after XD 1,188
Target Capital Structure
Debt 70% FV before XD (full dilution) 40.69
Equity 30% FV after XD (full dilution) 33.15
WACC 6.5%
Source: AWS estimate
Company Update 2 April 2015
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Income Statement
Unit: Btmn 2013 2014 2015E 2016E
Sales revenue 2,045 2,977 5,220 4,350
Total revenue 2,856 3,062 5,260 4,390
COGS 1,586 2,253 3,970 3,068
Gross profit 458 723 1,250 1,282
Others revenue 811 85 40 40
SG&A 325 395 653 494
EBITDA 1,107 709 1,028 1,368
Interest expense 47 58 56 167
Net Profit 883 545 815 947
Normalized Profit 180 518 815 947
EPS (Bt/share) 1.34 0.62 0.69 0.80
Norm. EPS (Bt/share) 0.27 0.59 0.69 0.80
no. of shares 660 880 1,188 1,188
Balance Sheet
Unit: Btmn 2013 2014 2015E 2016E
Cash 225 1,509 1,457 235
Account receivable 497 719 1,012 739
Inventories 351 304 485 351
Total current assets 1,323 2,605 3,033 1,398 Investments in associate & joint control 1,078 1,173 1,205 1,239
Property, plant and equipment 658 913 6,163 15,379
Intangible assets 967 2,214 2,644 2,616
Total non-current assets 3,257 4,654 10,366 19,587
Total assets 4,580 7,259 13,399 20,985
Short-term loans 242 2,110 1,500 2,000
Account payable 270 363 828 600
Total current liabilities 1,069 3,433 2,574 3,453
Long-term loans 157 0 3,573 8,337
Total non-current liabilities 390 467 4,040 9,803
Total liabilities 1,459 3,900 6,613 13,257
Issued and paid up share capital 660 880 1,188 1,188
Premium on share capital 425 425 2,977 2,977
Retained earnings 1,670 1,958 2,528 3,475
Total shareholders' equity 3,121 3,360 6,786 7,728
Total Liabilities and Equity 4,580 7,259 13,399 20,985
CG Report
5
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Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2013.
Corporate Governance Report disclaimer
The disclosure of the survey result of the Thai Institute of Directors
Association (“IOD”) regarding corporate governance is made pursuant
to the policy of the Office of the Securities and Exchange Commission.
The survey of the IOD is based on the information of a company listed
on the Stock Exchange of Thailand and the Market for Alternative
Investment disclosed to the public and able to be accessed by a
general public investor. The result, therefore, is from the perspective of
a third party. It is not an evaluation of operation and is not based on
inside information.
The survey result is as of the date appearing in the Corporate
Governance Report of Thai Listed Companies. As a result, the survey
result may be changed after that date, Asia wealth Securities Company
Limited does not conform nor certify the accuracy of such survey result.
Score Range Number of Logo Description
90 – 100
80 – 89
70 – 79
60 – 69
50 – 59
Below 50
No logo given
Excellent
Very Good
Good
Satisfactory
Pass
N/A
BAFS EGCO IRPC KTB PTTEP SAT SIM TOPBCP GRAMMY IVL MINT PTTGC SC SPALIBTS HANA KBANK PSL SAMART SCB TISCOCPN INTUCH KKP PTT SAMTEL SE-ED TMB
AAV BIGC DELTA HMPRO NBC PJW SAMCO SVI TOGACAP BKI DRT ICC NCH PM SCC TCAP TRCADVANC BLA DTAC KCE NINE PPS SINGER TF TRUEANAN BMCL DTC KSL NKI PR SIS THAI TSTEAOT BROOK EASTW LANNA NMG PRANDA SITHAI THANI TSTHASIMAR CENTEL EE LH NSI PS SNC THCOM TTAASK CFRESH ERW LHBANK OCC PT SNP TIP TTWASP CIMBT GBX LOXLEY OFM QH SPI TIPCO TVOBANPU CK GC LPN PAP RATCH SSF TK UACBAY CNT GFPT MACO PE ROBINS SSI TKT VGIBBL CPF GUNKUL MC PG RS SSSC TNITY VNTBECL CSL HEMRAJ MCOT PHOL S&J STA TNL WACOAL
2S BEAUTY CSS IHL MFEC PPM SKR TBSP TSC ZMICOAF BEC DCC INET MJD PPP SMG TEAM TSCAH BFIT DEMCO IRC MODERN PREB SMK TFD TTCLAHC BH DNA IRCP MONO PRG SMPC TFI TUFAIT BJC EA ITD MOONG PRIN SMT THANA TVDAJ BJCHI ESSO KBS MPG PTG SOLAR THIP TWFPAKP BOL FE KGI MTI QLT SPC THREL UMIAKR BTNC FORTH KKC NC QTC SPCG TIC UPAMANAH BWG FPI KTC NTV RCL SPPT TICON UPFAMARIN CCET GENCO L&E NUSA SABINA SST TIW UPOICAMATA CGD GL LRH NWR SALEE STANLY TKS UTAP CGS GLOBAL LST NYT SCBLIF STEC TLUXE UVAPCO CHOW GLOW MAJOR OGC SCCC STPI TMI UWCAPCS CI GOLD MAKRO OISHI SCG SUC TMT VIHAQUA CKP HOTPOT MATCH PACE SEAFCO SWC TNDT WAVEARIP CM HTC MBK PATO SEAOIL SYMC TPC WHAAS CMR HTECH MBKET PB SFP SYNEX TPCORP WINASIA CSC HYDRO MEGA PDI SIAM SYNTEC TRT WINNERAYUD CSP IFS MFC PICO SIRI TASCO TRU YUASA
Source: Thai Institute of Directors (IOD)
Contact
6
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Branch Address Phone Fax
Head Office 540 Floor 7,14,17 , Mercury Tower, Ploenchit Road, Lumphini,
Pathumwan Bangkok 10330
02-680-5000 02-680-5111
Silom 191 Silom Complex Building,21st Floor Room 2,3-1 Silom Rd.,
Silom, Bangrak, Bangkok, 10500 Thailand
02-630-3500 02-630-3530-1
Asok 159 Sermmitr Tower, 17th FL. Room No.1703, Sukhumvit 21
Road, Klong Toey Nua, Wattana, Bangkok 10110
02-261-1314-21 02-261-1328
Pinklao
7/3 Central Plaza Pinklao Office Building Tower B, 16th Flr., Room
No.1605-1606 Baromrajachonnanee Road, Arunamarin,
Bangkoknoi, Bangkok 10700
02-884-7333 02-884-7357,
02-884-7367
Chaengwattana
99/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr.,
Room 2204 Chaengwattana Road, Bang Talad, Pakkred,
Nonthaburi 11120
02-119-2300 02-835-3014
Chaengwattana 2
9/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr.,
Room 2203 Chaengwattana Road, Bang Talad, Pakkred,
Nonthaburi 11120
02-119-2388 02-119-2399
Mega Bangna 39 Moo6 Megabangna, 1st Flr., Room 1632/7 Bangna-Trad Road,
Bangkaew Bangplee, Samutprakarn 10540
02-106-7345 02-105-2070
Rayong 356/18 Sukhumvit Road, Nuen-Phra Sub District, Muang District,
Rayong Province 21000
038-808200 038-807200
Khonkaen 26/9 Srijanmai Road, Tamboonnaimuang, Khon Khaen
40000
043-334-700 043-334-799
Chonburi 44 Vachiraprakarn Road, Bangplasoi, Muang Chonburi, Chonburi
20000
038-053-858 038-784-090
Chaseongsao 233-233/2 Moo2 1st Flr., Sukprayoon Road, Na Meung Sub-
District, Meung District, Chachoengsao 24000
038-981-587 038-981-591